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An anonymous reader writes "Apparently someone set up a fake Twitter account under the name of a Russian Foreign Minister and said President Assad of Syria had been hurt/killed. From the article: 'The ministry and the embassy denied the veracity of the report and a message later appeared on the same Twitter account saying "this account is a hoax." It did not say what the aim of the hoax was although it had briefly affected oil markets.'"

WRT long straddle or for that matter the very existence of a stock option derivative added to the fact that commodities traders don't take physical delivery, I simply refuse to accept any argument that the markets are distinguishable from casino gambling (other than having an exceptionally toothless gambling commission).

I simply refuse to accept any argument that the markets are distinguishable from casino gambling (other than having an exceptionally toothless gambling commission).

Here's the difference:

In the financial world when you gamble with other people's money and lose big:a) you get a bailout and get to keep your bonuses and previous cut of the winnings.orb) your transactions get rolled back (see the HFT rollbacks).

In casinos when you gamble with other people's money and lose big, I don't think the outcomes are as rosy.

It's not mere toothlessness when they rollback HFT trades because of bugs in favoured _players_ systems (it's fine to rollback if it's due to bugs in the "casi

Oh, you mean like the Knight Capital debacle where everyone got a free showing of "HFT market-maker gone wild"? The one where they lost over $400 million on 150 stocks? Trades were busted on only a handful of stocks based on preexisting price rules (IIRC, rules set in place to combat the uncertainty of ad-hoc or politically-motivated busting in response to the May 6 Flash Crash). All other trades stand.

As I stated in my post, the existing cross-exchange price rules on trade cancellation were created in response to this event. So it's not a very good example of unfairness, because, well... the rule-makers agreed with you. The unpredictability of bust-or-no-bust made hedging decisions impossible for everyone involved.

So why did they cancel those trades in the recent incident? Why not keep all trades?

They canceled trades in the recent incident when the price exceeded predetermined bands. Why do they cancel trades at all? Well, to be honest I'm not exactly sure... I suppose there's some intent of "protecting investors" or "maintaining confidence in the markets". But anyone writing an automated trading system could have programmed in the rules to halt when trade prices exceeded the bands, so at least in the recent inc

They have [become much more consistent], but they systematically favor larger players. Smaller players can't even afford the sort of trading that can get rolled back.

If you're referring to capital limits or the fact that small players can go bankrupt before they accidentally push a price through the limit, then I agree with you but I don't really see an alternative. Traders who can weather larger losses will always win.

Knight made a HUUUUUUGE mistake. Their new program bought high and sold low, and apparently nobody was watching to make sure it was working right. They got a partial rollback. Had I as a small trader made a mistake proportionally that bad, I would get nothing.

Knight got a 'private bailout' in the form of a $400million investment from other financial companies. That certainly beats the public bailouts, but it still shows the point. Name a '99%er' who could accidentally bankrupt himself and get bailed out by

There's a purpose to it. Take a perishable good - bananas, say. Imagine that you live in a port that imports bananas and sells them to the locals. Sometimes there are lots of banana ships coming in, and sometimes there are only a few. This makes the price of bananas go up and down. Consumers don't like this - they prefer to have a steady banana price.

So you start a business. You buy a big refrigerated warehouse. When banana prices are low, you buy them; when prices are high, you sell them. From this

Except that you can't actually STORE bananas for very long if you hope to sell them. The small window dictated by the spoilage rate of bananas dictates that you can't do very much to stabilize the price, all you can do is drive it up a bit and pocket the difference. It's not like you can actually smooth out a bumper crop or a bad year.

So can a reseller who has the since to not implement just (almost sorta) in time warehousing.

Another way to stabilize the pricing is to do away with the whole damned thing and sell the product through a typical supply chain. That is, make the effort to gouge from what everyone knows is just a small hiccup in the shipping more trouble than it's worth.

Put another way, quit de-stabilizing the system by panicking every time someone sneezes and the system will find it's own minima.

Congratulations on a well used meme in context for once, and in a first post too, makes a nice change! Sadly, this could equally well be the work of a bored student or just about anyone else. I doubt there was that much thought behind it.

When I first heard this I assumed oil stocks would go up, you'd short sell and repurchase them after they went back down. So be careful how you manipulate the market, the result may not be what you expect.

I don't quite get your point. Since value is frequently defined in terms of scarcity, are you saying events that could create even a temporary drop in supply shouldn't have an effect on the value (as a function of the relative scarcity)?

Sure the this tweet was fake and doubtless was quickly corrected, but let's pretend it was true. Most assuredly it would alter the supply of oil, and hence it's value. But you don't that reflected in the price?

Why? They sell on a 12 month contract and as far as I know, the king leaves the actual work to others anyway. Meanwhile, their production is 1/20th of the U.S. domestic production. None of their oil goes to the U.S.

Given all of that, it would be hard to justify prices moving by more than $1/bbl in a rational market. But of course, the market if more pack of panicky animals than it is rational.

1. Legal documents don't magically influence supply.2. Commodities are globally priced. Are you arguing that the US force domestic producers sell at a lower price than the open market can supply? Will you also insist closely aligned foreign producers take a hit on prices?

2. No, I'm suggesting that if Syria shut down entirely, there would be less than a 1% deficit and they would likely make up the shortfall within a reasonable time.. Given that there is a 6 week pipeline and many producers are not at capacity due to market conditions, it would be hard to justify more than a percent or so price increase. If THE OPEN MARKET pushed it higher than that, it would be based on gouging and irrational panic rather than actual supply and demand.

Meanwhile, their production is 1/20th of the U.S. domestic production. None of their oil goes to the U.S.

Fact one: Syria has substantial oil production.

Fact two: the "king" in question is the head of state for an unstable, authoritarian government.

Fact three: a country in full blown civil war, which is what could happen with the death of Assad, won't be producing much oil for sale. A lot of infrastructure would be broken as well, depressing Syria's future oil production.

Fact four: In the event of a civil war, the fun and games could extend to other countries with greater oil production, leading possib

And prices spiked by a bit over dollar on an unfounded rumor from a tweet. That sure sounds like a bunch of panicky animals to me. A rational market might consider that any id10t can tweet.

The price was 1.17 since, in fact, nobody died and absolutely nothing changed except someone yelled BOO (in a silly voice). The $1 change would be about right IF the death was real and Syria simply exited the oil market entirely as a result. That $1 is generous considering the elasticity of S

Fact two: the "king" in question is the head of state for an unstable, authoritarian government.

There's been, more or less, a civil war in the country for about 17 months. And by their own reports [oilandgaseurasia.com], production is down to 200k bbl/day or less. The instability of Syria should be already priced in to a rational market.

Fact three: a country in full blown civil war, which is what could happen with the death of Assad, won't be producing much oil for sale. A lot of infrastructure would be broken as well, depressing Syria's future oil production.

Discussed immediately above, but to repeat, production is already depressed to less than one quarter of one percent of the wor

It could be an excuse to claim shipping to the U.S. would need to be re-arranged and that that would incur a cost on the U.S. market. I was just pointing out that that's not the case.

The part that really matters for the cost is that they produce well less than 1% of the world's crude and that the other producers have excess capacity due to market conditions (that is, there is supply elasticity) that can easily take up the slack and more even if Syria exited the market forever.

If that's the case, and you're confident that the move was due to this tweet, then you had an opportunity to make money.

Overly sharp moves are not, by themselves, an indication of irrationality. Suppose, for example, you had a large sum of money on deposit in a particular bank. And you heard a rumor that the bank was about to fail. If the rumor seemed to you to be reasonably credible you'd want to move your money to another bank. And so would many others who heard that rumor. Maybe nothing will happen, bu

What if I hear a rumor from some random Joe that someone might possibly be considering shifting less than 1 percent of the bank's total deposits elsewhere? That would be a lot closer to the situation we saw.

As for the rest, you got the sense backwards. The natural expectation would be a rise (if anything happened at all). I might well expect a rise, but mostly because the other traders are too irrational to consider the long list of mitigating factors. The way the market is structured makes it into an panic

The article says nothing about in what way the oil markets were affected, so to spare you having to RTFA I'll copy it below:

MOSCOW, Aug 6 (Reuters) - A Twitter user sent a hoax message on Monday that quoted Russia's ambassador to Damascus as saying Syrian President Bashar al-Assad may have been killed, forcing Russian officials to quickly deny the report.

A user on the social networking site apparently pretending to be Russian Interior Minister Vladimir Kolokoltsev quoted the envoy, Sergei Kirpichenko, as sa

Yeah, they also didn't say what time the tweet went out. What lazy reporting. Apparently, this is the twitter feed [twitter.com]. The first announcement went out at 9:59am. You can see a price spike a little after 10am [yahoo.com] (sadly, that link will probably be invalid after today), but the price stays up even after it was revealed as a hoax.